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Pennsylvania Governor's Pension Reform Proposal Rejected by Senate

Senate Majority Leader Dominic Pileggi (R., Delaware) told reporters the chamber was expected to vote on a bill this week that picks up only a small piece of Corbett's proposal: moving all new employees into 401(k)-style plans.

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Senate Majority Leader Dominic Pileggi (R., Delaware) told reporters the chamber was expected to vote on a bill this week that picks up only a small piece of Corbett's proposal: moving all new employees into 401(k)-style plans.

But the Senate, for now at least, is steering clear of the legally risky part of Corbett's plan -- and the one that would bring in the most savings: reducing future pension benefits for current employees by changing the way those benefits are calculated; and reducing the annual amount the state is required to contribute to its two retirement funds.

The state has separate plans for state employees and for public school teachers and staff.

Asked Tuesday whether that was as far as any pension reform plan would go in the legislature, Pileggi responded: "That's as far as they will go in the Senate."

At the start of the year, Corbett began crisscrossing the state to build his case for why tackling pension costs -- the "tapeworm," as he has repeatedly called it -- should be a top priority this year.

He and other administration officials said the pension problem had been created by a combination of generous enhancements to retirement benefits over the last decade, lackluster investment returns, and nearly a decade of underfunding by state government and local school districts.

The result: The two public pension plans have an unfunded liability of $41 billion. And over the next few years, pension costs are projected to skyrocket, threatening to gobble most of any additional revenue coming in to state coffers and leading, in turn, to a need for steep spending cuts and even steeper property-tax increases.